A bank is a financial institution functioning as an intermediary between the savers and users of funds.
The banks are accepting deposits from the public through various schemes and lends the money
accepted to the borrowers through various credit schemes. However, according to the information
available during the recent days, many banks are finding it very difficult to continue their banking
business on account of poor recovery in respect of loans granted by them to their borrowers. In this
article, certain tips are given as to how best the banks can improve their recovery efforts.
In fact a bank is a financial institution which functions as an intermediary between the savers and users
of funds. The banks are accepting deposits from the public through various schemes and lends the
money accepted to the borrowers through various credit schemes.
However, according to the information available during the recent days, many banks are finding it very
difficult to continue their banking business on account of poor recovery in respect of loans granted by
them to their borrowers.
The reasons for poor recovery are found to be as mentioned below:
01. Poor credit investigation: The credit managers are responsible for conducting effective credit
investigation during the course of selection of the borrowers. Any laxity at this stage on the part of the
banker will land him in trouble at a later date. In fact an intelligent banker never hesitates to conduct
effective interview with the borrower in finding out his eligibility for the loan to be sanctioned. There
are of course tailor made questions for conducting the investigation and the credit manager can do the
job in a better manner by getting proper guidance from his seniors.
02. Proper follow up: There is no definite guideline for determining the date from which the follow up
has to be made for the loan account. Once the loan is sanctioned, the banker should start following up
with the borrower for recovery of the dues from him. Smart bankers start communicating with the
borrowers seven days before the amount is due from the borrower. On the one hand this step serves as
a warning signal for the borrower and on the other hand, the borrower rarely thinks delaying his
03. Overdue accounts: Despite effective follow up with the borrowers through contacts over phone and
in person, many times, the borrowers fail to remit the dues on account of many reasons namely; they
might have lost their jobs thereby not getting their salaries; incurred losses in business curtailing income
generation; spent more money towards hospitalization expenses while recovery from illness either for
self or his dependants; the borrower intentionally stopped paying his dues etc.
04. Timely action: The borrower might have failed in remitting his dues on account of some genuine
reasons namely; losing the job, incurring business losses or ill health. During such situations, it is the
responsibility of the banker to properly guide the borrower in remitting his dues by way of effective
suggestions. Under this juncture the banker can think of restructuring the loans for some portion of the
loan amount while getting recovery for the balance amount. In the case of intentional borrowers, the
banker should not hesitate in taking stringent action against the borrowers and appropriate legal actions
enable the banker in successfully recovering the dues from the intentional defaulters.
05. Seizing of securities: In the case of loans secured by assets like house, buildings, vehicles, efforts can
be taken for seizing the securities and the bankers are supported through various legislation measures
when it comes to seizure of securities.
An intelligent banker keeps a watch over the critical loan accounts and he makes out better recovery
strategies in the case of difficult borrowers.
Such bankers are found to be instrumental in increasing the revenue for the bank.